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Airline soars in Milan
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December 29, 1999: 8:33 a.m. ET
Airlines are unpopular, but new Italian carrier, Gandalf, is flying with the techs
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LONDON (CNNfn) - Small can be beautiful as shown by Italy’s Nuovo Mercato index for growth stocks, which has just six members after six months with constituents having jumped an average of 300 percent since its launch.
Gandalf Airlines, a regional air carrier, which started operating in April, is the unlikely beneficiary of the Nuovo Mercato’s surge.
Airline stocks remain unfashionable, under-performing all of the major European averages as the industry comes out of a cyclical slump. Heavyweights such as British Airways (BAY) have fallen sharply this year while smaller carriers have suffered from the collapse of U.K.-based Debonair, a former member of the Easdaq high-growth index.
However, Gandalf has managed to turn the performance of new technology stocks in Italy to its advantage, leveraging the publicity surrounding the Nuovo Mercato’s to state its own case. "We chose [it] to...benefit from all of the visibility achieved in the most important foreign newspapers and magazines,” said chief executive Luciano Di Fazio.
Gandalf’s 17 million euro ($17.2 million) offering was 40 times oversubscribed and has jumped almost 400 percent since its flotation on Dec. 22.
The airline owes part of its success to the stellar performance of its fellow index members, all of which fit firmly in the technology sector, which has bred the most successful public offering tales this year.
Tiscali, which has pioneered free Internet access in Italy, remains by far the best-known stock on the index. After jumping 50 percent from its debut on Oct. 27, the stock has more than tripled from its offering price.
For four months, computer manufacturer Opengate plowed a lonely furrow as the Milan-based index’s only stock. Tiscali was subsequently joined by another computer manufacturer, Tecnodiffusione, the graphics firm Poligrafica San-Faustino and precision toolmaker Prima Industrie.
The only direct link between Gandalf and the fledgling Internet stocks, which have made huge gains on flotation around European bourses this year is that neither makes money.
However, Di Fazio, one of three former McKinsey & Co. consultants who started the airline last year, said that investors now view the potential development of investments in a different way.
"I do not believe there has been a change in the propensity of Italian investors to risk,” he told CNNfn.com. "But there has been an important change in investment opportunity. For the first time, Italian investors can ‘bet’ not only on historical data, but even on the basis of a project not supported by previous data.”
Gandalf aims to break even by 2001, it operates six regional jets to European business centers such as London and Paris from Milan’s city airport. This takes advantage of the local dislike of the new Malpensa airport, some 50km from the city center.
It has signed up major partners such as Swissair to feed traffic into their hubs, thus diluting the prospect of being crushed by larger competitors. 
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